Hmm, it looks like I was dead wrong about the S&P rating. They downgraded US debt to AA+ this afternoon, and I gotta say that I’m proud of them; that takes guts.

S&P has done the right thing; someone has to hold the US government accountable for its egregious and irresponsible fiscal policy; an excerpt of the S&P commentary after they announced the downgrade is here:
Excerpt:
“… the government fought the downgrade. Administration sources familiar with the discussions said the S&P analysis was fundamentally flawed. They spoke on condition of anonymity because they weren’t authorized to discuss the matter publicly. S&P had sent the administration a draft document in the early afternoon Friday and the administration, after examining the numbers, challenged the analysis.

S&P said that in addition to the downgrade, it is issuing a negative outlook, meaning that there was a chance it will lower the rating further within the next two years. It said such a downgrade, to AA, would occur if the agency sees smaller reductions in spending than Congress and the administration have agreed to make, higher interest rates or new fiscal pressures during this period.”

Source: http://news.yahoo.com/p-downgrades-us-credit-rating-aaa-003628509.html

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Are those the same rating agencies that rated subprime mortgages AAA? Funny how people still rely on their obvious competancy!

[...] Monday crash certain as S&P downgrades US treasuries Black Monday crash certain as S&P downgrades US treasuries ArabianMoney __________________ Remember…What the market IS DOING is more important than what it is GOING [...]

Nothing is certain “HONG KONG: Japan led Asian governments in seeking to calm fears over the American debt downgrade on Saturday, saying Tokyo’s trust in US Treasuries remained unchanged”

“Japan, the second largest holder of US debt after China, said the move would not affect its confidence in US government bonds, while Australia and South Korea warned against over-reacting to the downgrade”

Do you not think the last week priced anything into the market?

Ed Note: When countries tell you not to panic then you should really be worried! Besides we thought we had dealt with the US debt by Monday morning, clearly that was not the case and now the market will price this in…

http://www.independent.co.uk/opinion/the-daily-cartoon-760940.html

Cheer up, the tax payer will pick up the tab.

A certain Timothy Geithner declared in April that there was “no risk” of a downgrade.

What will happen with gold and silver? If there is a Market crash then it may sell off to present us with perhaps our last buying opportunity. Or the price may rise to the heavens as investors seek safe havens.

I guess we will find out soon.

I will hold you accountable if crash doesn’t happen on monday!!

Ed Note: That is the same logic that blames S&P for the downgrade (and not US economic mismanagement)!

Re-Thinking the Implications of This Downgrade:

If S&P doesn’t “buckle under the pressure” of a totalitarian USA, then what are some implications for global markets on Monday, 8 Aug???
Obviously, there’s gonna be a lot of chaos.

Methinks that, if S&P and the other ratings agencies wish to retain any credibility at all, then they would have to do some massive downgrading of other sovereign debt.

For example, the PIIGS bonds are nothing better than junk, yet some of them (Spain and Italy in particular) carry an “AA” rating, and France somehow still carries a AAA rating.

And what about Greece and Ireland, whose bonds are worse than junk?

Methinks the massive liquidations may likely continue (and the currency markets are gonna go wild!).

Ed Note: It’s called a downward spiral until you hit a bottom…

I hope you people have some gold, and a whole bunch of silver…because when currency collapses, gold and silver are still, and will always be money. Do your self a HUGE favor, find as much silver to buy this weekend, and buy it!

Aren’t these the same clowns who gave AAA ratings to junk mortgage securities and plunged the world into great recession? The rating agencies should have been tried and sent to prison for their criminal role.

Now, the same rating agency is downgrading­ US credit rating, although USA’s debt to GDP ratio is much lower than that of Japan and many leading European nations. How can anyone call Tea party “Patriots”­, when they have been responsible­ for downgrading­ of US credit rating for the first time in history by their reckless behavior?

This downgrade is just a symptom of the baby boomer feud that has been going since the 1960’s. It is a shame that Richie Cunninghams of the baby boomer generation didn’t go out into the streets with the hippies, and yippies, and other whack jobs and just have a knive fight with them. Now these 60’s marxists are now running the government and will bring it down……I hope someone takes out Obama’s buddy, Mr. Ayers before he gets a foot in a nursing home. Luckily, I am heavily invested in gold coins……..take posession of gold coins and don’t screw around with ETF’s. When the crash comes, you don’t want to call your broker to sell your ETF when you need to pay for gas, and grocieries at that moment or the next day.

What is happening right now in Europe is a lot more dangerous that the downgrade of the USA. The USA can print money. Italy and Spain can’t. Before the downgrade news hit, the experts were talking about the Fed having to bail out the ECB, if the European governments don’t come up with a couple of trillion euros to protect the Spanish and Italian bonds, within weeks. European bank stocks are getting very ugly for a reason.
I doubt that the DOW will crash on Monday. My guess is that it will open way down, then gradually come back to near where it closed last Friday. It has been doing that a lot on bad weekend news.
I expect QE 3 early next year. Gold should then head to $2,000. More central banks are starting to buy it as the new safe store of wealth to replace the US dollar.

Ed Note: Sorry Bill, you missed it – if interest rates are going up debt is going to become too expensive and there are limits being imposed on US monetary irresponsibility. The Fed’s room for action is shrinking.

Talk about Fear mongering! OMG! Get over yourself. You say the info was leaked and the MM knew the S&P move was coming and the place to be is precious metals?? Then I ask you this:

IF they knew..(and they didn’t) ..then why did precious metals sell off the same time the market did?

PHEWY!

Japan lost it’s credit rating as well a while back and they all predicted a crash in the yen and Japans treasuries as well as clamming the interest rates over there would sky rocket…

NEVER HAPPENED!

Powerhouse said: “IF they knew..(and they didn’t) ..then why did precious metals sell off the same time the market did?”

That’s a really easy question to answer!
The FED and their agents, JPM, HSBC, et al, have been extremely active all year in suppressing the price of gold and silver (take a long look at their net short positions). When bad news strikes, the FED and their agents go into overtime; if it’s the currency markets that they’re targeting, then GS gets the call. If it’s gold and silver, then JPM and HSBC (and CBOT, CME, CFTC, et al) get the call. No doubt, the US market gyrated all day long on 5 Aug; thus the FED was busy buying the ES (i.e. S&P futures) as well as the Dow and Nasdaq futures, in order to keep the market from going down another 4% on Friday. Buying futures in large quantities keeps the cash Dow and S&P up.

Who Knew What, and When Did They Know it?
It’s rather obvious that the “smart money” knew. Read what John Mauldin had to say about this topic (see reference below); he and a bunch of notable economists (including someone from the FED) were on a fishing trip in Maine on Friday. Mauldin knew, and he found out from Jim Bianco and John Silvia; still, he didn’t believe it, and he then asked Barry Ritholtz, Nouriel Roubini, and Mike McKee (Bloomberg), all of whom indicated that it was true!
Reference:
http://www.valueinvestingworld.com/2011/08/john-mauldin-case-for-going-global-is.html

More Thoughts:
In my remarks above, I stated that the liquidations will continue. But I don’t necessarily agree that the stock market will take a sharp nosedive (I may be wrong here, and get some egg on my face again, since I didn’t think S&P would have the guts to do the right thing!). The reasoning here is because the FED RIGHT NOW on the Globex is buying the futures markets, in order to hold up the cash Dow & S&P.

If the Euro markets tank on Monday (and that’s likely, until they sort of the next game of charades!), then the FED and their agents will be busy manipulating everything they can get their grubby hands on. In a nutshell, when the market closes on Monday, it may be down by a small amount, instead of down 4%. Watch them bang the close!!!

…I’ll wait ’til 4PM EDT before I start to eat crow!

I see DOW futures at -289 as of now. Not good.
http://www.bloomberg.com/markets/stocks/futures/

*** cough cough ***

Just finished eating that dirty crow . . . still choking on those feathers!

On the positive side, my large financial short positions are up over 9% today! And of course, gold and silver did very well today, too.

has anyone thought that if investors are dumping their stock and moving into purchasing gold – can anyone see this as a forced maneuvre to crash the gold and then everyone not in the know will lose everything? those in the know will quickly sell the gold and watch the price plummiet…DId anyone think of this scenario?

Ed Note: Pure paranoia and nothing else! What is happening is a shift into the currency of ages on a huge global scale. It’s the currencies that are plummeting against gold, not vice-versa. Who would be able to reverse a shift of this magnitude? Think about it. Nobody has that power.

According to Zero Hedge, countries outside of the U.S. dumped 74 billion dollars in U.S. Treasuries, most of it over the weekend:

“Over the weekend, we observed the perplexing sell off of $56 billion in US Treasurys courtesy of weekly disclosure in the Fed’s custodial account (source: H.4.1) and speculated if this may be due to an asset rotation, under duress or otherwise, out of bonds and into stocks, to prevent the collapse of the global ponzi (because when the BRICs tell the IMF to boost its bailout capacity you know it is global). We also proposed a far simpler theory: “the dreaded D-day in which foreign official and private investors finally start offloading their $2.7 trillion in Treasurys with impunity (although not with the element of surprise – China has made it abundantly clear it will sell its Treasury holdings, the only question is when), has finally arrived.” In hindsight the Occam’s Razor should have been applied. Little did we know 5 short days ago just how violent the reaction by China would be (both post and pre-facto) to the Senate decision to propose a law for all out trade warfare with China. Now we know – in the week ended October 12, a further $17.7 billion was “removed” from the Fed’s custodial Treasury account, meaning that someone, somewhere is very displeased with US paper, and, far more importantly, what it represents, and wants to make their displeasure heard loud and clear. (Source)

Undoubtedly, the Chinese and other countries have recently discovered that Italy and Greece, with smaller debt to income ratios than the United States, are less riskier and carry a higher rate of return. This is because, unlike the US, the Rothschild/Rockefeller bond rating agencies have trashed their country’s debt ratings, forcing them to pay a much higher interest rate than U.S. Treasuries. Hey, if you take the risk, you might as well earn the reward! http://www.moneyteachers.org/Foreigners+Dump+Treasuries.htm